The government is considering a tax cut of up to 10% for the salaried class as part of the upcoming 2025–26 federal budget, according to reports. This proposal has been shared with the International Monetary Fund (IMF) as part of ongoing discussions on fiscal policy and revenue reforms.
The proposed relief could reduce the tax burden on salaried individuals by as much as Rs50 billion. Talks with the IMF to finalize these and other budget measures are scheduled for May 14 to May 22, 2025, although the venue is yet to be confirmed.
Sources say the government is ready to introduce additional tax measures to cover any revenue shortfall caused by the relief. The goal is to strike a balance between easing the burden on salaried workers and maintaining revenue targets.
Salaried Class Leading in Tax Contributions
In the first ten months of the current fiscal year, the salaried class paid over Rs450 billion in taxes—more than any other sector including retail and exports. This is a significant increase compared to Rs368 billion collected from the same group in the 2023–24 fiscal year.
Originally, the government expected to raise an extra Rs100 billion from the salaried class through higher tax rates. However, actual collections have exceeded those estimates. The latest projections suggest that the total contribution will reach Rs550 billion by the end of June 2025.
High-Income Earners Facing Heavier Tax Burden
While middle-income earners have seen a moderate increase in taxes, high-income individuals earning over Rs1 million per month have been hit hardest. They face a 10% surcharge on top of the existing 40% tax rate.
Critics argue that these high tax rates are unfair to top earners and could lead to dissatisfaction among professionals and business executives.